PURE STORAGE INC CLASS A

Pricing Strategies for Cybersecurity Products and Services

• Licensing and Revenue Structure

  • The company is exploring alternative pricing strategies for its technology including a focus on licensing models. This includes software licensing fees, support fees, and a lack of hardware sales to hyperscalers, which influences revenue dynamics.
  • The revenues from licensing agreements are tied closely to usage, specifically to data storage capacity deployed. The expectation is that licensing models will allow for more scalable revenue tied directly to customer usage.

• Market Dynamics

  • There is a noted shift in the market where operational budget pressures are leading some customers to transition from Storage-as-a-Service to traditional sales, indicating a broader economic impact on pricing strategies.
  • The Evergreen//One offering, which has traditionally provided subscription-based access, has seen lower conversion rates recently, likely due to customers opting for capital expenditure (CapEx) models amidst tighter operational budgets.

• Expectations for Future Growth

  • Given the increasing pressure from operational costs, there are expectations that once these budgeting pressures stabilize, the demand for subscription services might gain momentum again, following a trend seen in the early growth phases of such services.
  • The anticipated contribution from the newly established partnerships and design wins with hyperscalers is expected to drive significant operating margin expansion by FY 2027, with promising opportunities for pricing strategy innovations being tied directly to performance and capacity engagements.

Summary Insights

• The exploration of value-based pricing within the context of licensing reflects a response to changing customer needs and market pressures.
• Subscription models are evolving as a critical focus, with potential for further growth as companies adapt to operational spending constraints.
• The current strategy involves integrating hyperscale engagements with flexible pricing mechanisms, poised to enhance both value delivery and revenue generation in a continually transforming market landscape.